Linked in previous, worth a reprint as a more general look at currencies and standards.
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An 1880s British book on banking gave a simple statistic that altered my view of how money works. The statistic:
Earlier I summarized an American book from the same era, which I unfortunately failed to href and can’t find again.
Physical currency is a tiny part of all transactions. Even in the 1880s when real gold and silver coins were active, 95% of all transactions were by check or money order, 4% by paper currency, and less than 1% by actual metal.
We believe that gold was the only real currency in the 1800s. Nope, checks and drafts were ALMOST the only currency, just as the modern digital drafts are ALMOST the only currency now.
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Before noticing these facts, I went along with the standard notion that money began as barter, then advanced to indirect barter with precious items, seashells or gold or silver, then much later abstracted to checks and drafts. In this view, gold is the only real money. All else is just substitutes and symbols.
This is backwards, as some recent historians have tried to clarify. Transactions began as TRUST between people who knew each other, or people who had a way to enforce TRUST. When the quantity of transactions grew beyond reliable memory, written number systems developed as a way of remembering and enforcing the TRUST. Drafts and checks came next, and coins were an auxiliary method suited for travelers, never the foundation of commerce.
In other words, currency is like sandwiches or pemmican. Condensed nutrition, easy to carry when you’re between trust zones.
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The contrast between the two views showed up neatly in the responses to Zimbabwe’s new gold-standard currency. Some commenters stuck to the traditional gold is the only hard money view, so they complained that the central bank didn’t own enough gold to cash out every note. Others recognized that money is trust, and gold is just a metric or reference point. They complained accurately that gold itself is no longer an official constant.
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New notes:
1. Who deleted the standard for gold? Nixon, of course. Nixon is the universal answer to every Who broke it? question.
2. Did Zimbabwe keep the new gold? Yes, according to this March 2025 article. The article is in a Cornell University journal, so it’s not likely to be Zimbabwe government publicity. That’s encouraging! Zimbabwe deserves stability, and maybe they’re getting it now.
Polistra's Mill 